Fall 2016 issue of Horizons

LAW FIRMS

Growth in Demand for Law Firm Services

Y/Y% CHANGE

9%

6%

3%

0%

GROWTH

-3%

-6%

-9%

2008

2011

2013

2007

2010

2014

2015

2009

2012

Source: Thomson Reuters Peer Monitor

The survey states that many firms are addressing overcapacity issues in several different ways: ∙ Cutting under-performers: 54.0% of firms dropped lawyers that did not have enough work and 73.0% of firms removed chronic under-performers ∙ Shifting work to less costly attorneys, such as part-time or contract attorneys ∙ De-equitizing partners: nearly 50.0% of the firms surveyed moved equity partners out of the profit-sharing class Balancing the decline in client demands for services and the capacity of firms has become more difficult in this era of decreasing profit margins. Efficiency, Pricing and Billing For years, law firms have predominantly used a business model based on hourly rates with little attention toward completing projects based on fixed pricing arrangements. More recently, as clients have been searching for ways to gain more predictability with their legal spending,

they are challenging firms’ business models by asking for rate discounts, fixed fees or fee write-offs altogether. While this issue seems to be prevalent in the legal profession, firms do not appear to be doing enough to address these client demands. The Altman Weil 2016 Firms in Transition Survey further illustrates how pricing and efficiency have played a major role in changing the legal services market and what firms are doing to address these issues. The survey reported that while 93.0% of firm leaders believe it is an ideal strategy to focus on improving efficiency of their services, only 44.0% have actually changed their firms’ strategic view on efficiency. While some are not addressing the issues, many firms are being more proactive in order to shift their strategies to embrace greater efficiency. Some initiatives that illustrate firms’ commitments toward greater efficiency include enhancing their knowledge management systems.

Knowledge management emphasizes reducing costs while still maintaining

page 34 | horizons Spring 2016